Labour MP Huw Irranca-Davies today called on the Rothschild bankers to fulfil their “moral responsibility” to people living in fear of “penury” who took part in an equity release scheme that involved using their properties in Spain as collateral.

The Ogmore MP secured a Westminster Hall debate during which he said: “[The] matter under discussion resembles nothing more or less than an equity release scam. I should point out that not only the name of Rothschilds is linked to this, but also other Scandinavian and British and other banks where pensioners were lured into gambling away their lifetime savings and homes on two enticing but ultimately flawed pretexts: firstly, that by investing a loan secured against a mortgage on a property in Spain they would obtain a small additional income in addition to their often limited pension in retirement; secondly, that by registering a mortgage on this property, they could indeed be helped in eliminating inheritance taxes for their children.”

A Rothschild spokesman yesterday said: “Rothschild provided a small number of mortgage loans to customers in Spain between 2005 and 2008, acting solely as the lender and it did not provide any financial or investment advice nor did it provide any of the investment products. The matter was reviewed by the UK Financial Ombudsman last year who concluded that Rothschild did not lend irresponsibly and is not responsible for the investment advice which the borrowers took from their IFA.”

But the MP said during the debate: “I say [to] Rothschilds, you have badly deviated from your core values, badly served your brand and reputation, badly served people who regarded themselves as your clients - not the clients of some intermediaries as they claim - and who are now facing penury after investing in products which your name, Rothschilds, your integrity, your values were used as a key selling point.”

Conservative Treasury minister Sajid Javid offered to pass on the MP’s concerns to Rothschilds, meet with him, and raise the matter with counterparts in Spain and Guernsey.

He said: “The equity release product in question was sold to a number of UK pensioners resident in Spain. It appears it was sold to them by independent financial advisers operating in Spain who suggested that they release equity from their house and then use this loan to invest in a fund, often claiming that this would have inheritance tax benefits. These products were then provided by a variety of banks, mainly based in Scandinavia, but including Rothschild Bank. With the onset of the financial crisis, these investments did not perform so that investors, many of them, breached the terms of the loan that they were given.”

Mr Javid said the “UK Government’s ability to act in this case is limited” but added: “I understand that Rothschilds have provided customers affected with some flexibility; for example, it is my understanding that they are not repossessing the properties of those who have been affected. That, of course, is welcome.”